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Sydney Morning Herald
09-05-2025
- Business
- Sydney Morning Herald
Competition is toughening, but will it be enough for Qantas to lift its game?
In this way, the 'healing hand of the market' may have an effect, he said. Qantas chief executive Vanessa Hudson, speaking during the company's half-year results in February, said: 'We always said that we welcome competition … Our focus is about looking after our customers. We feel really confident in being able to compete.' Six months before Qatar's entry into the market was given final approval, the government released its long-awaited Aviation White Paper to address broader industry concerns. The White Paper calls for legislation to create an Aviation Industry Ombuds Scheme, with the 'power to direct airlines and airports to provide remedies to consumers'. It also includes a proposal for a new Aviation Customer Rights Charter. A spokeswoman for Minister for Infrastructure and Transport Catherine King said: 'The Albanese Labor government has introduced the most comprehensive reforms to the aviation sector in 25 years.' Yet even before the White Paper's release, the prospect for domestic competition dimmed, with significant changes for two smaller players in 2024: Rex, for 'regional express', went into administration in July and stopped flying to capital cities, while Bonza went out of business in April. The Albanese government, which had acquired $50 million in debt from Rex in January, said it would step in to ensure regional flights continue to fly while it seeks a new buyer. With Rex out of the picture, the Australian Competition and Consumer Commission found real average fare revenue per passenger had increased by about 3 percentage points to 13.6 per cent in the second half of 2024 following 'the loss of competition from Rex's exit on these routes '. By the end of the year, Virgin Australia, Qantas and the Qantas-owned Jetstar controlled a combined 98.6 per cent of the domestic market. On-time arrivals for all airlines averaged 80.2 per cent in March, a fall from the long-term average of 80.7 per cent, according to Bureau of Infrastructure and Transport Research Economics numbers. On-time departures averaged 80.7 per cent, down from an average of 81.8 per cent, although airlines blamed the impact of Cyclone Alfred in Queensland. Consumer advocate Adam Glezer of Consumer Champion says that, in this climate, the pace of reform is too slow. 'There is no momentum in terms of anything meaningful,' he said. 'By preparing the Aviation White Paper, it appears that the government is trying to appease the public by saying, 'we are putting you first', while they're effectively doing nothing.' While the government and regulators can set the conditions for the industry, the market would be needed to produce competitive dynamics. That likely means a third or even fourth domestic airline would be necessary. University of Sydney's Merkert says that if a new, viable domestic carrier did emerge, it would need to profitable, so it would need access to the domestic premium market of Brisbane, Sydney and Melbourne, which is a 'golden triangle' of profitability. 'The real margins are made domestically, and especially on that sector,' he said. For now, Merkert says Qantas and Virgin are 'showing capacity discipline' on the capital city routes, ensuring that they don't compete to the point of undercutting their own profits. 'They have almost an informal agreement to be quite happy as what we would call a 'duopoly' because that allows both of them to generate very healthy revenues and profit margins.' Ahead of an expected ASX relisting, Virgin has swung to profit. The company's earnings before interest and tax rose to $519.4 million in 2024, up 18 per cent from $439.4 million in 2023, on growing demand from premium leisure and corporate travellers as well as budget-passengers. Qantas posted an 11 per cent increase in pre-tax profit of $1.4 billion in the half-year to December and flagged a domestic fleet refresh of plane interiors. It's also adding new Airbus A321XLRs. The Coalition, for its part, has been less impressed by the state of the air travel industry. Before the May 3 federal election, in which voters resoundingly backed the Labor government of Anthony Albanese, Shadow Infrastructure and Transport Minister Senator Bridget McKenzie said that 'under Labor, aviation competition has nosedived'. In April, McKenzie proposed the creation of a two-year trial that would allow international airlines flying into Darwin to carry domestic passengers between that city and other Australian capitals, a process known as cabotage. Slot machinations There are other obstacles for more robust domestic competition. Capacity constraints at Sydney Airport are also to blame, Merkert says. With its limited number of 'slots' – the time allotments for the use of the 'airport infrastructure necessary to arrive or depart ' – as well as the airport's curfew, Sydney airport constraints can hold back capacity across the 'golden triangle'. Sydney's airport, restricted to 80 aircraft movements an hour, has not had ' flexibility to respond to delays caused by disruptions like bad weather'. Merkert says a potential competitor to Qantas or Virgin would need a set of two slots in Sydney, one for the morning and one for the evening, for business and premium customers wanting commuter service. Nearly one-third of Sydney's total slot pool is reportedly available to new entrants, but with only one in 10 slots available in peak periods. 'You need to have two slots each day and that is getting increasingly difficult, if not impossible,' Merkert says. Sydney Airport chief Scott Charlton said: 'There's been good progress in the last six months on reforms at Sydney Airport, including a new slot co-ordinator and an audit of slot use.' The airport is also implementing a 'recovery period', which will allow airlines access to more slots following weather disruptions, he said. In April, Airport Coordination – a UK-based outfit with a vast international client base – took over Sydney's slot management from the government-formed Airport Coordination Australia, pledging more transparency on slot usage, on which it says it will publish regular data. A spokeswoman for minister King said: 'We've passed legislation to reform the slot system at Sydney Airport, boosting competition and levelling the playing field for new entrants.' With the market power effectively held by two airline groups (Qantas owns Jetstar), domestic airlines face few financial or regulatory consequences for shifting or cancelling scheduled flights. Customer advocates say a customer rights charter upheld by an ombuds scheme would need the power to force airlines to pay compensation. To that end, Nationals Senator Bridget McKenzie last year sponsored a 'pay on delay' bill, which would put explicit penalties on airlines for delaying or cancelling flights for commercial reasons. The bill remains before the Senate. Enshrining customers' rights to get a refund for delayed and cancelled flights is a path already blazed by the European Union, which has had such legislation since 2005, and more recently the US, which under the Joe Biden administration instituted a rule change that entitled passengers to a refund 'if their flight is cancelled or significantly changed'. Peter Forsyth, aviation consultant and former professor of economics at Monash University, says if such a compensation scheme were imposed in Australia, 'there's a question about who pays for it. My guess is that much of the cost would go to the passenger ultimately.' But how much would that cost be? In Europe, the additional cost per passenger resulting from its compensation scheme was estimated in 2022 to be between US60¢ and $US1.20 (94¢ to $1.87), according to passenger advocacy business AirHelp. Would the threat of a compensation scheme force airlines to lift their game? It's not clear. University of Maryland researcher Jingyi Xing found that the EU customer compensation scheme legislation called EC261, introduced in 2005, reduced the proportion of flights delayed for more than three hours. But it also led to a fall in the share of flights with delays up to 15 minutes, or those arriving early. The 'EC261 does not improve the overall on-time performance of flights,' Xing said. Loading 'A compensation policy like this affects not only consumer welfare but also competition among firms,' she said. 'Because all carriers are subject to the same compensation scheme, low-cost carriers may be placed at a disadvantage relative to legacy carriers as they charge cheaper prices and have lower revenues,' she said. That means one fallout of such a scheme could be a further shake-out of low-cost carriers on certain routes. 'This could ultimately lead to higher prices and harm to consumers,' she says. Given the situation in Australia, with two companies providing almost all domestic flights, it's hard to imagine a further reduction in airline choice. Glezer, who for a fee helps customers claw back money from businesses, said: 'COVID … should have been a wake-up call for the government to implement change for the Australian flying public. 'How anyone can say Australians should not be entitled to a full refund for all flight cancellations is mind-boggling. 'The fact that the government hasn't implemented this shows their disregard for the consumer.'
The Age
09-05-2025
- Business
- The Age
Competition is toughening, but will it be enough for Qantas to lift its game?
In this way, the 'healing hand of the market' may have an effect, he said. Qantas chief executive Vanessa Hudson, speaking during the company's half-year results in February, said: 'We always said that we welcome competition … Our focus is about looking after our customers. We feel really confident in being able to compete.' Six months before Qatar's entry into the market was given final approval, the government released its long-awaited Aviation White Paper to address broader industry concerns. The White Paper calls for legislation to create an Aviation Industry Ombuds Scheme, with the 'power to direct airlines and airports to provide remedies to consumers'. It also includes a proposal for a new Aviation Customer Rights Charter. A spokeswoman for Minister for Infrastructure and Transport Catherine King said: 'The Albanese Labor government has introduced the most comprehensive reforms to the aviation sector in 25 years.' Yet even before the White Paper's release, the prospect for domestic competition dimmed, with significant changes for two smaller players in 2024: Rex, for 'regional express', went into administration in July and stopped flying to capital cities, while Bonza went out of business in April. The Albanese government, which had acquired $50 million in debt from Rex in January, said it would step in to ensure regional flights continue to fly while it seeks a new buyer. With Rex out of the picture, the Australian Competition and Consumer Commission found real average fare revenue per passenger had increased by about 3 percentage points to 13.6 per cent in the second half of 2024 following 'the loss of competition from Rex's exit on these routes '. By the end of the year, Virgin Australia, Qantas and the Qantas-owned Jetstar controlled a combined 98.6 per cent of the domestic market. On-time arrivals for all airlines averaged 80.2 per cent in March, a fall from the long-term average of 80.7 per cent, according to Bureau of Infrastructure and Transport Research Economics numbers. On-time departures averaged 80.7 per cent, down from an average of 81.8 per cent, although airlines blamed the impact of Cyclone Alfred in Queensland. Consumer advocate Adam Glezer of Consumer Champion says that, in this climate, the pace of reform is too slow. 'There is no momentum in terms of anything meaningful,' he said. 'By preparing the Aviation White Paper, it appears that the government is trying to appease the public by saying, 'we are putting you first', while they're effectively doing nothing.' While the government and regulators can set the conditions for the industry, the market would be needed to produce competitive dynamics. That likely means a third or even fourth domestic airline would be necessary. University of Sydney's Merkert says that if a new, viable domestic carrier did emerge, it would need to profitable, so it would need access to the domestic premium market of Brisbane, Sydney and Melbourne, which is a 'golden triangle' of profitability. 'The real margins are made domestically, and especially on that sector,' he said. For now, Merkert says Qantas and Virgin are 'showing capacity discipline' on the capital city routes, ensuring that they don't compete to the point of undercutting their own profits. 'They have almost an informal agreement to be quite happy as what we would call a 'duopoly' because that allows both of them to generate very healthy revenues and profit margins.' Ahead of an expected ASX relisting, Virgin has swung to profit. The company's earnings before interest and tax rose to $519.4 million in 2024, up 18 per cent from $439.4 million in 2023, on growing demand from premium leisure and corporate travellers as well as budget-passengers. Qantas posted an 11 per cent increase in pre-tax profit of $1.4 billion in the half-year to December and flagged a domestic fleet refresh of plane interiors. It's also adding new Airbus A321XLRs. The Coalition, for its part, has been less impressed by the state of the air travel industry. Before the May 3 federal election, in which voters resoundingly backed the Labor government of Anthony Albanese, Shadow Infrastructure and Transport Minister Senator Bridget McKenzie said that 'under Labor, aviation competition has nosedived'. In April, McKenzie proposed the creation of a two-year trial that would allow international airlines flying into Darwin to carry domestic passengers between that city and other Australian capitals, a process known as cabotage. Slot machinations There are other obstacles for more robust domestic competition. Capacity constraints at Sydney Airport are also to blame, Merkert says. With its limited number of 'slots' – the time allotments for the use of the 'airport infrastructure necessary to arrive or depart ' – as well as the airport's curfew, Sydney airport constraints can hold back capacity across the 'golden triangle'. Sydney's airport, restricted to 80 aircraft movements an hour, has not had ' flexibility to respond to delays caused by disruptions like bad weather'. Merkert says a potential competitor to Qantas or Virgin would need a set of two slots in Sydney, one for the morning and one for the evening, for business and premium customers wanting commuter service. Nearly one-third of Sydney's total slot pool is reportedly available to new entrants, but with only one in 10 slots available in peak periods. 'You need to have two slots each day and that is getting increasingly difficult, if not impossible,' Merkert says. Sydney Airport chief Scott Charlton said: 'There's been good progress in the last six months on reforms at Sydney Airport, including a new slot co-ordinator and an audit of slot use.' The airport is also implementing a 'recovery period', which will allow airlines access to more slots following weather disruptions, he said. In April, Airport Coordination – a UK-based outfit with a vast international client base – took over Sydney's slot management from the government-formed Airport Coordination Australia, pledging more transparency on slot usage, on which it says it will publish regular data. A spokeswoman for minister King said: 'We've passed legislation to reform the slot system at Sydney Airport, boosting competition and levelling the playing field for new entrants.' With the market power effectively held by two airline groups (Qantas owns Jetstar), domestic airlines face few financial or regulatory consequences for shifting or cancelling scheduled flights. Customer advocates say a customer rights charter upheld by an ombuds scheme would need the power to force airlines to pay compensation. To that end, Nationals Senator Bridget McKenzie last year sponsored a 'pay on delay' bill, which would put explicit penalties on airlines for delaying or cancelling flights for commercial reasons. The bill remains before the Senate. Enshrining customers' rights to get a refund for delayed and cancelled flights is a path already blazed by the European Union, which has had such legislation since 2005, and more recently the US, which under the Joe Biden administration instituted a rule change that entitled passengers to a refund 'if their flight is cancelled or significantly changed'. Peter Forsyth, aviation consultant and former professor of economics at Monash University, says if such a compensation scheme were imposed in Australia, 'there's a question about who pays for it. My guess is that much of the cost would go to the passenger ultimately.' But how much would that cost be? In Europe, the additional cost per passenger resulting from its compensation scheme was estimated in 2022 to be between US60¢ and $US1.20 (94¢ to $1.87), according to passenger advocacy business AirHelp. Would the threat of a compensation scheme force airlines to lift their game? It's not clear. University of Maryland researcher Jingyi Xing found that the EU customer compensation scheme legislation called EC261, introduced in 2005, reduced the proportion of flights delayed for more than three hours. But it also led to a fall in the share of flights with delays up to 15 minutes, or those arriving early. The 'EC261 does not improve the overall on-time performance of flights,' Xing said. Loading 'A compensation policy like this affects not only consumer welfare but also competition among firms,' she said. 'Because all carriers are subject to the same compensation scheme, low-cost carriers may be placed at a disadvantage relative to legacy carriers as they charge cheaper prices and have lower revenues,' she said. That means one fallout of such a scheme could be a further shake-out of low-cost carriers on certain routes. 'This could ultimately lead to higher prices and harm to consumers,' she says. Given the situation in Australia, with two companies providing almost all domestic flights, it's hard to imagine a further reduction in airline choice. Glezer, who for a fee helps customers claw back money from businesses, said: 'COVID … should have been a wake-up call for the government to implement change for the Australian flying public. 'How anyone can say Australians should not be entitled to a full refund for all flight cancellations is mind-boggling. 'The fact that the government hasn't implemented this shows their disregard for the consumer.'
ABC News
23-04-2025
- Business
- ABC News
Foreign airlines could soon fly domestic routes to and from Darwin, but would it reduce prices?
Booking a return flight from Darwin can cost upwards of $1,000. And that's for flights that depart and arrive around midnight or the early morning hours. It's little wonder airfares are a key issue in the Northern Territory this election campaign. Candidates in the Darwin-based seat of Solomon are all promising to push for lower prices as a cost-of-living measure. The Coalition has now announced if elected it would change laws to allow international airlines to carry domestic passengers to and from Darwin and the east coast. But would the policy be effective? Return airfares from Darwin regularly cost more than $1,000. ( Facebook: Darwin International Airport ) What is being promised? The Coalition has promised to implement a two-year trial allowing international airlines to fly between Darwin and east coast capital cities, if it wins government. Currently, federal laws restrict foreign carriers from flying domestic routes. The Coalition said it would remove the "outdated" laws which it said had "kept Darwin airfares high and restricted services". The changes would allow airlines to stop over in Darwin while on an international route, enabling them to pick up and drop off passengers. Under the proposed changes, airlines would be able to pick up and drop off passengers in Darwin, while on an international route. ( ABC News: Michael Franchi ) Are foreign airlines interested? Current Member for Solomon Luke Gosling has previously The Labor MP said Darwin could become "a pilot location" for cabotage, but there was A Labor spokesperson said the federal government's Aviation White Paper "already commits us to opening up domestic routes to international carriers on a case-by-case basis". "We will consider requests by airlines when demand is there," they said. Luke Gosling says there is no demand for cabotage. ( ABC News: Hamish Harty ) Asked repeatedly whether the Coalition had spoken to international carriers before announcing its policy, Shadow Minister for Transport Bridget McKenzie didn't provide a direct answer. "Once we actually open that opportunity for international airlines, then there will be a demand because we know even the Darwin-Brisbane flight, that's at nearly 88 per cent capacity," she told ABC Radio Darwin on Wednesday. "Airlines are interested where there is demand, where they can actually make money. "That's why we're putting it on the table to trial it here for two years and give that opportunity to international carriers, such as [those in] the Philippines, Vietnam, Malaysia, Singapore." Bridget McKenzie Asian airlines could be interested in flying Australian domestic routes. ( ABC News: Luke Stephenson ) Neil Hansford, an international aviation consultant, says airlines aren't interested in Darwin stopovers on international routes. "There's no incentive for them to do it because they've got all the traffic rights they need to, to fly directly to the major markets of Brisbane, Sydney, Melbourne," he said. "The consumer doesn't want intermediate stops. "This is going against the trend of Australians who want to fly direct with no stops." Neil Hansford says international airlines aren't interested in Darwin stopovers. ( ABC News ) Are Darwin airport fees a turn-off for airlines? The Virgin has claimed the fees ADG has Nevertheless, Mr Hansford says the fees are another reason international airlines may not take interest in the Coalition's proposed changes. "Currently the high cost of using our airports is what drives the prices," he says.
Epoch Times
21-04-2025
- Business
- Epoch Times
Qantas, Virgin Say EU-Style Passenger Compensation Won't Fix Root Causes Behind Flight Delays
Executives of Australia's two largest airlines, Virgin and Qantas, have been probed on why Australian flight passengers do not enjoy the same consumer protections as those in the U.S. and EU. In August 2024, the Labor government released the Aviation White Paper, which outlined its vision for the sector toward 2050. As part of the strategy to improve customer experience, the government is committed to developing the Aviation Customer Rights Charter ( The Charter lays out the basic framework for 'prompt and fair remedies and support' for consumers subject to delays and cancellations. This includes receiving regular updates on the status of their flights, having the option to cancel the flight with a full refund, receiving assistance to rebook alternative flights without fees, as well as meal reimbursement and accommodation where flights are delayed. However, it stops short of establishing a compensation scheme like in the EU. How Compensation Schemes Work? In 2004, the EU parliament passed the Air Passengers Rights Regulation 2004 that sets up standards for helping passengers dealing with flight delays or cancellations. Related Stories 4/5/2025 3/28/2025 Under While U.S. consumers are not automatically compensated in the event of delays or cancellations, regulations introduced by the Biden administration in 2024 required airlines to give automatic refunds to passengers. A recent survey commissioned by travel insurance provider Insure&Go indicated that cancellations and delays were of most concern for Aussie passengers. Around 76 percent of respondents identified cancellations and delays as the most likely risk for domestic travel in 2025, followed by extreme weather (flooding, bushfire, and so on) at 59 percent, and losing luggage at 42 percent. Passengers arriving from Berlin receive European Union flag at Sofia International Airport in Sofia, Bulgaria on March 31, 2024. Nikolay Doychinov/AFP via Getty Images Compensation Schemes Do Not Deal With the Root Cause of Delay: Airlines During a recent parliamentary inquiry hearing, Nationals Senator Bridget McKenzie asked Virgin Australia and Qantas—whose combined domestic market share amounts to 70 percent—why consumers in Australia had weaker protections than those in the United States and EU. Stephen Beckett, general manager at Virgin Australia, did not directly answer the question, but said it was important that consumers were protected. 'That is why we do strongly support better access to Australian Consumer Law, where customers can seek remedies for when their flight does not go to the on-time performance and Virgin Australia has agreed and supported a strengthening of the complaints handling body and for that body to be able to make final determinations that the airlines must live by,' he told the Rural and Regional Affairs and Transport Legislation Committee. Beckett also stated that the compensation scheme in the EU did not appear to fix the cancellation problem there. 'The types of performance that you're looking to improve are not connected to what is paid and what's not paid. It is [connected to] the root causes of delays and cancellations, such as weather, air traffic, control, engineering, [and] people being sick in Europe,' he said. Echoing the sentiment, Qantas Domestic CEO Markus Svensson said that, based on his experience in the EU, a compensation scheme did not improve customer protection. 'I now also know from all the studies that it [compensation scheme] increases the cost. It hasn't improved in terms of cancellations and delays,' he said. McKenzie was not satisfied with the executives' answer and pointed out that the purpose of a compensation scheme was not to improve airlines' behaviour but to compensate Australians. 'The evidence just now was that European travellers have been compensated to the tune of $9 billion thanks to those airlines—something that's not available currently and under the government's laws to the Australian travellers,' she said. Nationals Senators Bridget McKenzie at Parliament House in Canberra, Australia, on June 23, Law Framework Undermines Consumers' Rights: Lawyer Alliance Meanwhile, Victoria Roy, the chair of the Australian Lawyers Alliance's Travel Law Special Interest Group, raised concerns that current laws were undermining air passengers' rights. 'Firstly, there's no specific framework in Australia that covers passenger rights. So some travellers who fly internationally are covered by foreign schemes, whilst others aren't,' she said. 'It's been specified that the Charter is not adding any additional rights. It's just to run alongside the Australian Consumer Law. And the Australian Consumer Law is vague and complex to navigate. 'So, the difficulty is that many Australians don't have rights. If they do have rights, they don't know what those rights are.' Roy also noted that there was no simple, affordable way for Australian passengers to enforce the few rights they had. As such, she suggested the parliament come up with a new, simpler law to address this loophole.
